This guide explains what small business set-asides are, the federal programs that create them, and how to find and win one.
Why it matters: Small business set-asides open billions in federal contracting dollars that large primes can’t touch — but only businesses that meet the eligibility rules can compete for them.
Key Takeaways
- Set-asides reserve contracts for small businesses: The government awards these contracts competitively, or as a sole-source award when only one qualified small business can do the work.
- Federal programs support businesses: The 8(a), WOSB, SDVOSB, and HUBZone are examples of programs that reserve a share of government dollars for small businesses that fit in certain categories.
- GovWin IQ helps contractors find set-asides: Deltek GovWin IQ centralizes contract opportunities and agency data, helping small businesses identify and pursue set-aside contracts more efficiently.
What Is A Small Business Set-Aside Contract?
A small business set-aside is a government procurement in which all or part of a contract is reserved exclusively for small businesses. U.S. Federal, state, local, and Canadian agencies each set their own eligibility rules, so qualification requirements vary by program and by government. Set-asides exist to give small businesses a fair, level playing field against larger competitors.
Types of Small Business Set-Asides
There are two primary types of small-business set-asides: competitive and sole-source.
Competitive Set-Asides and the Rule of Two
Competitive set-asides apply when at least two qualified small businesses can supply what the government needs. This threshold is known as the Rule of Two, and agencies use it to decide whether to reserve a contract for small businesses before opening it to full and open competition.
Sole-Source Set-Asides
Sole-source set-asides are less common, since most government contracts are awarded competitively. When only one qualified small business can fulfil the government’s requirement, the agency can issue a sole-source award directly to that business without a competitive bid.
Eligibility Requirements for Small Business Set-Asides
To qualify for a set-aside, a business must first meet the U.S. Small Business Administration’s size standard for its industry, which the SBA assigns using the North American Industry Classification System (NAICS) code that best matches the work being bid.
Beyond size, a business must also self-certify or obtain SBA certification for any specific program — such as 8(a), WOSB, SDVOSB, or HUBZone — it wants to pursue.
Eligibility for these programs isn’t a one-time checkbox.
“Small businesses, particularly those certified through SBA programs, are operating in a new environment where eligibility is no longer static. To stay protest-resilient, they must treat eligibility as a continuous, auditable program with consistent documentation and oversight”
- Ed DeLisle, Partner at Thompson Hine LLP
2026 Deltek Clarity GovCon Report
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Small Business Set-aside Programs
There are four common programs and categories that the federal government uses to help designate specific contracts for small businesses.
And according to the 2026 Deltek Clarity GovCon Report, 62% of small businesses now participate in a small disadvantaged business program, up from 54% last year.
8(A) Business Development Program
The 8(a) program is operated by the U.S. Small Business Administration (SBA). The U.S. federal government aims to award federal contracting dollars to qualified small, disadvantaged businesses through the SBA’s 8(a) Business Development Program. Certification lasts for a maximum of nine years.
Despite the program’s long history, participation remains limited. The most recent Deltek Clarity survey reported 8(a) program participation at just 6% of small businesses.
Women-Owned Small Business Contracts
Each year, the federal government aims to award 5% of federal contracting dollars to WOSB (women-owned small businesses). Within the WOSB program, an Economically Disadvantaged Women-Owned Small Business (EDWOSB) sub-category exists for eligible businesses that also meet additional economic disadvantage criteria.
Service-Disabled Veteran-Owned Contracts
Each year, the federal government aims to award 3% of federal contracting dollars to SDVOSB (service-disabled veteran-owned small businesses).
HUBZone
The HUBZone program empowers small businesses in historically underutilized business zones and aims to award at least 3% of federal contracting dollars to certified companies each year.
How To Get Small Business Set-aside Contracts
Follow these five steps to prepare your government contracting business to find and win small business set-asides.
- Register for the programs your business qualifies for. This could include the 8(a) and HUBZone programs, as well as any federal, state, local, or provincial programs that offer opportunities for small businesses across different categories.
- Consider building experience as your business begins its break into government contracting by first seeking out subcontracting partnerships and serving as a member of a prime contractor’s team.
- Connect with the government agencies you want to work with, learn about their small business goals, and make sure that the opportunity and agency will be a good fit for your business.
- Develop a way to identify and apply for the small-business opportunities your business targets. Some market intelligence providers, such as Deltek GovWin IQ, offer tools that make this process straightforward and rewarding.
- Create a strong proposal to win the contract. Your proposal must include extensive information to present a compelling case to the buying agency or potential prime contractor teaming partners, and it should demonstrate your past performance and core competencies.
Proactive businesses are using additional tools to save time on identifying new leads. QuesTek Innovations, a 50-person small business, uses GovWin IQ to centralize its opportunity pipeline:
“Instead of searching 10 different sites, we can focus on GovWin IQ and look at all federal opportunities,”
- Brian Registe, Chief Financial Officer at QuesTek.
Teaming Opportunities for Small Businesses
Teaming agreements are common ways for small businesses to partner with larger vendors to gain access to government contracts they could not have fulfilled on their own.
Specifically, a small business teaming agreement is an arrangement that allows a contractor to remain categorized as a small business while bringing in additional businesses (or multiple businesses) to contribute to the project.
When searching for government contracts, small businesses should always take advantage of the many resources and programs designed by government entities to help them compete beyond their size.
Most agencies have offices of small and disadvantaged business utilization (OSDBUs) and/or small business programs to ensure the agency maximizes opportunities to contract with small businesses in its acquisitions.
Many contracts require small businesses to perform a certain amount of work, creating a need for larger businesses to partner with smaller ones to gain access to these contracts.
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Federal Small Business Contracts
The federal government seeks to award a significant percentage of its overall contracting dollars to small businesses each year. It does much of this through its small business set-aside programs, such as the 8(a) and HUBZone programs. It makes a point to encourage women-owned, minority-owned, and service-disabled veteran-owned small businesses to apply to do business with the federal government.
Businesses seeking federal small business contracts should also educate themselves on the GSA Schedules program, which offers access to federal, state, and local government opportunities.
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Federal Contracting, Simplified
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State and Local Small Business Contracts
Small businesses looking to scale their SLED government contracting sales should explore their target markets to identify strategies that best position them for success. State, local, and education (SLED) governments often offer their own programs designed to create more contracting opportunities for small businesses. They will also sometimes have a preference for local vendors.
Small businesses selling to state and local governments should also seek out contract opportunities they are uniquely qualified to pursue, such as opportunities reserved for small businesses and common socioeconomic set-aside categories such as women-owned, minority-owned, and veteran-owned.
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This free 101 guide breaks down which entities make up the SLED market, how to register and compete, and how to build a winning strategy.
Canadian Small Business Contracts
If your organization sells to, or is interested in selling to, Canadian federal and provincial governments, or is interested in growing your footprint in Canada, you should know that the Canadian government operates set-aside programs designed to stimulate its economy.
Governments in Canada often use similar set-aside requirements to those used by U.S. federal, state, and local governments.
One notable point of distinction is that the Canadian government emphasizes stimulating opportunities for Indigenous-owned businesses that can prove business ownership that is First Nations, Inuit, or Métis affiliated. Typically, these businesses must have a footprint or residency in Canada, and most set-aside requirements in Canada are generally aimed toward these requirements.
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Frequently Asked Questions
A small business set-aside is a government contract, or portion of a contract, reserved exclusively for small businesses. Federal, state, local, and Canadian agencies use set-asides to give small businesses a fair opportunity to compete against much larger contractors.
The Rule of Two is the standard that U.S. federal agencies use to decide whether to set aside a contract for small businesses. If at least two qualified small businesses can perform the work at a fair price, the agency can reserve the contract as a competitive small business set-aside instead of opening it to full and open competition.
A competitive set-aside is used when at least two small businesses can fulfill the government’s need, so the contract is awarded through competitive bidding among qualified small businesses. A sole-source set-aside is issued directly to one business, without competition, when only that business can meet the requirement.
A U.S. business qualifies as small when it meets the U.S. Small Business Administration’s size standard for its industry, which is tied to the North American Industry Classification System (NAICS) code for the work being bid. Businesses must also apply for or self-certify into any specific set-aside program, such as 8(a), WOSB, SDVOSB, or HUBZone, they want to pursue.
Small businesses can find set-aside opportunities by registering for the programs they qualify for, building experience through subcontracting or teaming with larger primes, and monitoring agencies and platforms for open opportunities. Market intelligence tools such as Deltek GovWin IQ help contractors track set-aside opportunities and agency history in one place.
